With everyone living “the new normal” you would expect home buying to be down. However, it’s making a remarkable recovery. Bryan Nazor says mortgage applications were down 35% six weeks ago, but they are making a major comeback. They are now just 1.5% below the rate for last year.
Some types of mortgages are even increasing. Government mortgages are up 5%, including FHA and VA loans. As businesses begin to reopen, so is the housing market. Those who were considering buying a home before the shutdown are now finding themselves in a great position to do so Bryan Nazor explains.
Mortgage rates are unstable at the moment, due to the volatility of the market. Rates are low historically speaking, with average rates in the mid 3%, with slight ups and downs from week to week. The rate for a 30 year fixed rate mortgage was 3.56% on the 19th of April, and 3.55% on the 19th of May.
Lower rates have also led to many people choosing to refinance. While the Federal Reserve has cut rates twice since the beginning of the pandemic and initiated quantitative easing, other changes may make it more difficult to refinance.
While mortgage payments are being deferred for many during the pandemic, mortgage companies are reluctant to take on risk. Bryan Nazor states that riskier buyers may struggle to get a loan, including refinancing.
Mortgage credit availability has fallen 26% in the last few months due to stricter standards. JP Morgan and Chase is now requiring a credit score of 700 and a minimum down payment of 20%.
Bryan Nazor explains the March Stimulus bill had an impact as well. The bill allows those with government-backed mortgages to delay their mortgage payments for up to a year if they were adversely affected by the virus. The lenders will get reimbursed, but they will have to essentially front the money for these delayed payments to the bond investors. They are now trying to avoid mortgages where they think they will have to delay payments. They hope that stricter standards will exclude those who will need the forbearance made possible by the new law.